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Question 1 of 10
1. Question
Which of the following factors be considered by FINRA to see if the aggregation of accounts is required?
I. the degree of contact and communication between directors and/or managers of separate accounts
II. the degree of information shared among the account members
III. the sharing of kindred business purposes and interests
IV. similar patterns of trading activity among separate entitiesCorrect
Rule no 2360. Options
FINRA will also consider the following factors in determining if aggregation of accounts is required:
(i) similar patterns of trading activity among separate entities;
(ii) the sharing of kindred business purposes and interests;
(iii) whether there is common supervision of the entities which extends beyond assuring adherence to each entity’s investment objectives and/or restrictions;
(iv) the degree of contact and communication between directors and/or managers of separate accounts.Incorrect
Rule no 2360. Options
FINRA will also consider the following factors in determining if aggregation of accounts is required:
(i) similar patterns of trading activity among separate entities;
(ii) the sharing of kindred business purposes and interests;
(iii) whether there is common supervision of the entities which extends beyond assuring adherence to each entity’s investment objectives and/or restrictions;
(iv) the degree of contact and communication between directors and/or managers of separate accounts. -
Question 2 of 10
2. Question
Which of the following statement is/are true regarding disclosure statement?
I. A disclosure statement is a document explaining the rules of a financial transaction in plain, nontechnical language
II. A disclosure statement is also a document outlining the specific terms
III. A disclosure statement is also a document outlining the specific terms and conditions of a loan, including its interest rate, any fees, the amount borrowed, insurance, and any prepayment rights and the responsibilities of the borrower
IV. A disclosure statement is registered with SIPC ( The Securities Investor Protection Corporation)Correct
Rule no 2360. Options
Disclosure Document(s) — The term “disclosure document” or “disclosure documents” shall mean those documents filed with the SEC, prepared by one or more options markets and meeting the requirements of SEA Rule 9b-1. They shall contain general explanatory information relating to the mechanics of buying, writing and exercising options; the risks involved, the uses of and market for the options; transaction costs and applicable margin requirements; tax consequences of trading options; identification of the options issuer and the instrument underlying the options class; and the availability of the prospectus and the information in Part II of the registration statement.Incorrect
Rule no 2360. Options
Disclosure Document(s) — The term “disclosure document” or “disclosure documents” shall mean those documents filed with the SEC, prepared by one or more options markets and meeting the requirements of SEA Rule 9b-1. They shall contain general explanatory information relating to the mechanics of buying, writing and exercising options; the risks involved, the uses of and market for the options; transaction costs and applicable margin requirements; tax consequences of trading options; identification of the options issuer and the instrument underlying the options class; and the availability of the prospectus and the information in Part II of the registration statement. -
Question 3 of 10
3. Question
Which of the following statement is/are true regarding long position?
I. Long position and long are often used In the context of buying an options contract
II. A long position—refers to the purchase of a liability with the expectation it will increase in value
III. Going long on a stock or bond is the more conventional investing practice in the capital markets
IV. Being long on a stock or bond investment is a measurement of timeCorrect
Rule no 2360. Options
Long position and long are often used In the context of buying an options contract. The trader can hold either a long call or a long put option, depending on the outlook for the underlying asset of the option contractIncorrect
Rule no 2360. Options
Long position and long are often used In the context of buying an options contract. The trader can hold either a long call or a long put option, depending on the outlook for the underlying asset of the option contract -
Question 4 of 10
4. Question
What does the term “net delta” mean?
Correct
Rule no 2360. Options
Net Delta — The term “net delta” means the number of shares that must be maintained (either long or short) to offset the risk that the value of an equity options position will change with incremental changes in the price of the security underlying the options position.Incorrect
Rule no 2360. Options
Net Delta — The term “net delta” means the number of shares that must be maintained (either long or short) to offset the risk that the value of an equity options position will change with incremental changes in the price of the security underlying the options position. -
Question 5 of 10
5. Question
What does opening writing transaction mean?
Correct
Rule no 2360. Options
Opening Writing Transaction — The term “opening writing transaction” means an option transaction in which the seller’s (writer’s) intention is to create or increase a short position in the series of options involved in such transactionIncorrect
Rule no 2360. Options
Opening Writing Transaction — The term “opening writing transaction” means an option transaction in which the seller’s (writer’s) intention is to create or increase a short position in the series of options involved in such transaction -
Question 6 of 10
6. Question
Which of the following statement is/are true regarding options contract?
I. An options contract is an agreement between two parties to facilitate a potential transaction on the underlying asset at a preset price
II. For stock options, a single contract covers 100 shares of the underlying stock
III. Options are generally used for hedging purposes but can be used for speculation
IV. Buying an option offers the right, but not the obligation to purchase or sell the underlying assetCorrect
Rule no 2360. Options
Options Contract — The term “options contract” means any option as defined in paragraph (a)(21). For purposes of paragraphs (b)(3) through (12), an option to purchase or sell common stock shall be deemed to cover 100 shares of such stock at the time the contract granting such option is written. If a stock option is granted covering some other number of shares, then for purposes of paragraphs (b)(3) through (12), it shall be deemed to constitute as many option contracts as that other number of shares divided by 100 (e.g., an option to buy or sell five hundred shares of common stock shall be considered as five option contracts). A stock option contract that, when written, grants the right to purchase or sell 100 shares of common stock shall continue to be considered as one contract throughout its life, notwithstanding that, pursuant to its terms, the number of shares that it covers may be adjusted to reflect stock dividends, stock splits, reverse splits, or other similar actions by the issuer of such stock.Incorrect
Rule no 2360. Options
Options Contract — The term “options contract” means any option as defined in paragraph (a)(21). For purposes of paragraphs (b)(3) through (12), an option to purchase or sell common stock shall be deemed to cover 100 shares of such stock at the time the contract granting such option is written. If a stock option is granted covering some other number of shares, then for purposes of paragraphs (b)(3) through (12), it shall be deemed to constitute as many option contracts as that other number of shares divided by 100 (e.g., an option to buy or sell five hundred shares of common stock shall be considered as five option contracts). A stock option contract that, when written, grants the right to purchase or sell 100 shares of common stock shall continue to be considered as one contract throughout its life, notwithstanding that, pursuant to its terms, the number of shares that it covers may be adjusted to reflect stock dividends, stock splits, reverse splits, or other similar actions by the issuer of such stock. -
Question 7 of 10
7. Question
What is Options Contract Equivalent of the Net Delta?
Correct
Rule no 2360. Options
Options Contract Equivalent of the Net Delta – the term “options contract equivalent of the net delta” means the net delta divided by the number of shares underlying the options contract.Incorrect
Rule no 2360. Options
Options Contract Equivalent of the Net Delta – the term “options contract equivalent of the net delta” means the net delta divided by the number of shares underlying the options contract. -
Question 8 of 10
8. Question
Which of the following statement is/are true regarding “put”?
I. A put is an options contract that gives the owner the right, but not the obligation, to sell a certain amount of the underlying asset
II. Puts are traded on various underlying assets, which can include stocks, currencies, commodities, and indexes
III. The value of a put option appreciates as the price of the underlying stock depreciates relative to the strike price
IV. the buyer of a put option believes that the underlying stock will drop below the market price before the expiration dateCorrect
Rule no 2360. Options
Put — The term “put” means an option contract under which the holder of the option has the right, in accordance with the terms of the option, to sell the number of units of the underlying security or deliver a dollar equivalent of the underlying index covered by the option contract. In the case of a “put” issued by The Options Clearing Corporation on common stock, it shall mean an option contract under which the holder of the option has the right, in accordance with terms of the option, to sell to The Options Clearing Corporation the number of units of the underlying security covered by the option contract or to tender the dollar equivalent of the underlying index.Incorrect
Rule no 2360. Options
Put — The term “put” means an option contract under which the holder of the option has the right, in accordance with the terms of the option, to sell the number of units of the underlying security or deliver a dollar equivalent of the underlying index covered by the option contract. In the case of a “put” issued by The Options Clearing Corporation on common stock, it shall mean an option contract under which the holder of the option has the right, in accordance with terms of the option, to sell to The Options Clearing Corporation the number of units of the underlying security covered by the option contract or to tender the dollar equivalent of the underlying index. -
Question 9 of 10
9. Question
Which of the following statement is/are true regarding collar?
I. A collar is commonly known as a hedge wrapper
II. is an options strategy implemented to protect against large losses, but it also limits large gains
III. An investor should not consider executing a collar if they are currently long a stock that has substantial unrealized gains
IV. An investor creates a collar position by purchasing an out-of-the-money put option while simultaneously writing an out-of-the-money call optionCorrect
Rule no 2360. Options
Collars — A short call position accompanied by a long put position, where the short call expires with the long put, and the strike price of the short call equals or exceeds the strike price of the long put position and where each short call and long put position is hedged with 100 shares (or other adjusted number of shares) of the underlying security or securities convertible into such underlying security. Neither side of the short call/long put position can be in-the-money at the time the position is established.Incorrect
Rule no 2360. Options
Collars — A short call position accompanied by a long put position, where the short call expires with the long put, and the strike price of the short call equals or exceeds the strike price of the long put position and where each short call and long put position is hedged with 100 shares (or other adjusted number of shares) of the underlying security or securities convertible into such underlying security. Neither side of the short call/long put position can be in-the-money at the time the position is established. -
Question 10 of 10
10. Question
What does box spreads mean?
I. A long call position accompanied by a short put position with different strike price
II. It is commonly called a long box strategy
III. The cost to implement a box spread, specifically the commissions charged, can be a significant factor in its potential profitability
IV. A box spread’s payoff is always going to be the difference between the two strike pricesCorrect
Rule no 2360. Options
Box Spreads — A long call position accompanied by a short put position with the same strike price and a short call position accompanied by a long put position with a different strike priceIncorrect
Rule no 2360. Options
Box Spreads — A long call position accompanied by a short put position with the same strike price and a short call position accompanied by a long put position with a different strike price